In plain words
An asset is something you own that has value; a liability is money you owe. What you own minus what you owe is your net worth.
Two worked examples
UK
£3,200 in savings and a car worth £10,000 are assets; £8,500 left on the car loan and £1,400 on a card are liabilities.
Net worth: £13,200 − £9,900 = £3,300.
Nigeria
₦500k in savings, a plot worth ₦10m and a car worth ₦5m are assets; ₦4.5m left on the car loan and ₦150k on a credit card are liabilities.
Net worth: ₦15.5m − ₦4.65m = ₦10.85m.
The common mistake
The mistake: Counting something bought on credit as wealth while forgetting the loan still owed on it.
What’s true: Buying on credit adds an asset and a liability together — you are only as well off as the part you have paid for.
Income in; spending and saving out
Every movement of money is one of three: income is money that arrives; an expense is money gone for good; saving is money set aside that is still yours. Income is what reaches you after any fees taken first. A budget that mixes the three shows money as spent that you still have, or income you never received.
US
Pay of $2,500 arrives: income.
$300 moved to savings: saving — still yours.
$900 rent and $15 of bank fees: expenses.
A $1,000 sale with a $120 platform fee is $880 of income.
Japan
Pay of ¥250,000 arrives: income.
¥30,000 moved to savings: saving — still yours.
¥80,000 rent and ¥220 of bank fees: expenses.
A ¥10,000 sale with a ¥1,000 platform fee is ¥9,000 of income.
Where you’ll meet it
- Your money, or money you will owe?The checkout looks the same either way; what differs is whether the bill is already paid or still coming.
- Fees turn small loans into big onesThe sticker rate is the advert; fees are the price — total cost is the only honest comparison.
- Small monthly charges, big yearly billMonthly prices are set to feel small; the yearly total is what the habit really costs.
Related terms
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Education, not financial advice Source: Theorise lesson text